PE Week Wire — Friday 1/24

Intrinsic Therapeutics Inc., a Wilmington, Mass.-based developer of surgical equipment for use in spinal soft tissue repair, announced today that it has raised $25 million in Series C funding. Sprout Group led the investment, with previous investors New Enterprise Associates and Spray Venture Partners also participating.

Headsprout, a Seattle-based developer of online education software for teaching basic academic skills, has closed on $6.3 million in its Series C financing. Roser Ventures led the round with Sofinnova Ventures, the Raisin Fund and others also participating.

Birch Telecom Inc. and Ionex Telecom Inc. announced that the two companies will merge. The combined company will serve over 500,000 telephone lines, heavily concentrated in Texas, Oklahoma, Missouri and Kansas, and generate $350 million in annual revenues. An investment group led by Gilbert Global Equity Partners, AEA Investors, Veronis Suhler Stevenson LLC and Texas Growth Fund – the major backers of Ionex – will provide over $40 million in new equity funding to support the merger. Ionex has raised around $230 million in two rounds of venture funding, the most recent of which was an October 2000 deal at a post-money valuation of $265.16 million.

Capella Education Co., the Minneapolis-based parent of Capella University, has received $7.5 million in venture capital funding from Maveron LLC.

Advent International has acquired a majority interest in Hildebrando SA de CV, a Mexico City-based information technology systems and applications developer and integrator, for $10 million. In addition, within 18 months of the transaction’s closing, Advent will provide an additional $7 million to be used by Hildebrando for acquisitions.

The Government of Malaysia has launched a $30 million venture capital fund focused on local biotech companies.

Internap Network Services Corp. (NASDAQ: INAP) has named Robert R. Jenks as chief financial officer. Jenks was previously with General Electric, where he was responsible for the company’s global private equity investment activity in the communications industry.

The Austin-American Statesman is reporting that Edward Clark has been named executive vice president, chief financial officer and general counsel for Emergent Technologies Inc., an Austin-based venture firm that specializes in biotech investments. He was previously a consultant to the company.

eFinancialNews is reporting that France-based Sigefi Private Equity has closed its third middle-market buyout fund with EUR146 million ($155m). Limited partners in the new vehicle include NIF Ventures, GE Capital and the Royal Bank of Scotland. NEWS FROM THURSDAY 1/23Cases of diabetes may be on the rise, but the same cannot be said for Metabolex Inc., a Hayward, Calif.-based company focused on diabetes-related drug discovery and development. The company has raised nearly $85 million in venture funding, but yesterday announced a new CEO, 20% workforce reduction and a decision to suspend the start of Phase II trials on its lead drug candidate until it can secure more funding. The company will continue its partnered research programs with Pfizer and Yamanouchi Pharmaceutical Co. Investors in Metabolex include Abbot Labs, Bay City Capital, Charter Ventures, John Hancock, Lombard Odier, Pfizer and Warner-Lambert.

Celator Technologies Inc., a Vancouver-based oncopharmaceutical company, has secured $6.8 million in new venture capital financing. Ventures West and Growthworks led the round, which also included Business Development Bank of Canada. The company had previously received seed funding from Genyous Life Sciences and Hearthstone Investments Ltd.

Bear, Stearns & Co. Inc. has hired Julie Levenson as a managing director in Equity Capital Markets. Levenson was most recently with Merrill Lynch as a managing director of the Private Equity Group, heading its West Coast operations.

Things are (sort of) looking up for JPMorgan Partners. The group’s parent bank reported fourth quarter losses of $91 million, versus a $348 million loss in the fourth quarter of 2001. The group has now recorded a loss in each of the past ten quarters. For the year, JPMorgan Partners has lost $733 million.

Tullett PLC has agreed to sell its specialist voice and data network services subsidiary Gains International to GS Capital Partners 2000, a Goldman Sachs private equity fund, for up to 15.4 million pounds sterling, subject to adjustments and earn out calculations. Pending consent of regulatory bodies, GS Capital Partners will acquire Gains International Asia Holdings Ltd., Gains International (US) Inc. and Gains International (Europe) Ltd. from Gains International Infocom Holdings BV, of which Tullett is the majority shareholder. The remaining 28.6% of the company is owned by Tokyo based Totan IT. On completion of the sale Gains will continue to supply voice and data services to Tullett.

The Jordan Co. yesterday announced the acquisition of the Precision Products Sector of Cookson Group PLC (Precision) by Precision Engineered Products Inc., a company formed by Jordan and Precision’s senior management group.

Dynegy Inc., a Houston-based energy provider, has sold its European communications business to an affiliate of London-based private equity firm Klesch & Co. Terms of the transaction were not disclosed.

Kubi Software, a Lincoln, Mass.-based collaberation and e-mail software developer, emerged from stealth mode yesterday with approximately $8 million in funding. Lazard Technology Partners company’s Series A funding, and was joined by seed investor Venture Investment Management Company LLC.

Provectus Pharmaceuticals Inc. has appointed Stuart Fuchs to its board of directors. Fuchs is a co-founder and managing principal of Chicago-based venture firm Gryffindor Capital Partners.

NEWS FROM WEDNESDAY 1/22

Mohr Davidow Ventures celebrates its 20th year anniversary this year, but it’s not planning a party. Instead, the Menlo Park, Calif.-based firm is making additional cutbacks to its seventh fund and closing its Reston, Va. and Seattle offices. For more on this story, go to www.PrivateEquityWeek.com .

Veridiem, a Maynard, Mass.-based provider of marketing resource management software, announced today that it has closed on $6.01 million in Series C funding. The deal involved existing investors North Bridge Venture Partners, Venrock Associates, Infinity Capital and North Hill Ventures.

Rob Soni has left his general partner post with Bessemer Venture Partners in Wellesley Hills, Mass. The semiconductor and communications equipment investor had been with the firm since 1994. In an interview last week with Mass High Tech, Soni gave no explicit reason for his departure, except to say that he and his former partners had “reasonable differences about strategic decisions.” No word on what will happen to his board seats.

Chaparral Network Storage, a Boulder, Colo.-based developer of specialized data delivery appliances, today announced that it has closed $8.2 million in financing led by Athenian Venture Partners. The company has now raised $49 million in venture capital since its 1998 founding.

Pronto Networks, a Pleasanton, Calif.-based provider of wireless infrastructure solutions for Wi-Fi hot spots, has raised approximately $5 million in venture funding from Draper Fisher Jurvetson and the Intel Communications Fund.

Shoreline Communications, a Sunnyvale, Calif.-based provider of enterprise-class IP PBX systems, today announced that it has secured an additional $10.75 million of financing. Previous investors participated in this round, including Crosspoint Venture Partners, Lehman Brothers, Foundation Capital, JP Morgan and Focus Ventures. Kathryn Gould, general partner at Foundation Capital, has joined Shoreline’s board as part of the deal. Existing board members include Seth Neiman, managing partner at Crosspoint, and Brian Paul, vice president with Lehman Brothers.

CiraNova Inc., a Campbell, Calif.-based electronic design automation company startup analog layout automation tools, today announced it has raised $1.75 million in Series A funding. The deal was led by Alloy Ventures, with participation from an unnamed semiconductor manufacturer and law firm Wilson Sonsini Goodrich & Rosati.

American Securities Capital Partners announced today it has acquired a controlling interest in Westward Communications, publisher of 61 community newspapers in Texas and Colorado.The transaction was valued at approximately $100 million.

Corticon Technologies, a San Mateo, Calif.-based provider of next-generation business rules software, today announced that it has raised $3 million from existing investors like American Century Ventures and Securitas Capital in its latest round of funding.

Akustica Inc., a Pittsburgh-based provider of acoustic system-on-chip solutions, has closed its Series A financing with $4.5 million. The company had announced in October a first close of $2.25 million.NEWS FROM TUESDAY 1/21

CollabNet Inc., a Brisbane, Calif.-based provider of enterprise infrastructure for collaborative software development, has raised $13 million in its third round of venture funding. Norwest Venture Partners led the deal with a $5.8 million commitment, and was joined by fellow new investors NTT Leasing Co. and Oracle Corp. Past backers Benchmark Capital and Intel Capital also participated. PE week subscribers can read more on this funding in the protected Deal News section of www.PrivateEquityWeek.com.

JAFCO Ventures, a venture capital group with offices in Boston and Palo Alto, has decided to part company with Japan-based parent company JAFCO Group. The new entity will be named Globespan Capital Management, and is already in the midst of raising a fourth fund with a target capitalization of up to $300 million. According to a press report in TheBoston Globe, the parting was amicable with JAFCO Group already signed up as a limited partner in the new fund.

Axiowave Networks Inc., a Malborough, Mass.-based networking company developing equipment for core carrier and service provider backbones, has closed $45 million in Series C funding, bringing the total funding to date to $96 million. Co-led by new investor Argonaut Private Equity and existing investors Gainesborough Investments, Ray Stata, Mukesh Chatter and other private investors, this round will be used to grow the company’s product, sales and support teams.

ScriptLogic Corp., a Pompano Beach, Fla.-based provider of desktop administration software for Windows-based networks, announced today it has received $8 million of new venture funding from Insight Venture Partners. Scott Maxwell and Michael Triplett of Insight will join the ScriptLogic board as part of the agreement.

Taqua Inc., a Richardson, Texas-based provider of next-generation Class 5 switching, today announced that it has received $20 million of fifth round venture funding. The deal was lead by RRE Ventures, and also includes investments by Investcorp and Point Judith Capital Partners, as well as all of Taqua’s existing investors – Bessemer Venture Partners, Columbia Capital and Court Square Ventures. In addition, Taqua also announced that Rich McGinn, a general partner at RRE Ventures and former chairman and CEO of Lucent Technologies, and Alex Guira, a partner at Investcorp, have joined its board of directors.

Organ Recovery Systems a Chicago-based company focused on improving the quality and quantity of transplantable organs, tissues and cells, announced yesterday that it has closed a $14 million Series B funding round. The deal was led previous investors DEXIA Bank Belgium, NMT New Medical Technologies AG and ProSeed Capital Holdings CVH. New investors StoneFund, Maniv Bioventures LLC and Regeneration Technologies Inc. also participated.

Emptoris Inc., a Burlington, Mass.-based provider of e-sourcing solutions, today announced the completion of financing from new and existing investors totaling $20.5 million. Menlo Ventures led the third funding round, with participation from new investor HarbourVest Partners and all existing investors, including NETinvest, from previous funding rounds.

The Pennsylvania Public School Employees’ Retirement System (PSERS) and the Pennsylvania State Employees’ Retirement System (SERS) on Friday rejected what they termed “invalid” subpoenas issued by state Auditor General Bob Casey, and instead reiterated their offer to work cooperatively with the Auditor General in a review of the funds’ operations. Casey has been attempting to force the two funds to submit to a performance audit by his department, although the groups claim he has no legal authority to do so. Both pension systems are major investors in private equity funds.

BayStar Capital has announced the closing of a second investment in XM Satellite Radio Inc. The firm increased its financing commitments to $475 million with an additional $25 million from investors spearheaded by Everest Capital Ltd. The financing is in the form of 10% senior secured convertible discount notes due in 2009 at a conversion price of $3.18 per share of common stock.

Thanasis Delistathis has promoted to the position of partner at Draper Atlantic, a venture firm based in Reston, Va. Delistathis initially joined the firm in May of 2000 as a principal investor.

Wellspring Capital Management has acquired Vatterott Educational Centers Inc., a private career college based in St. Louis and founded in 1969. Terms of the deal were not disclosed.

Adelphia Communications Corp. has named former William Schleyer as its new CEO and board chairman. Most recently, Schleyer was president and CEO of AT&T Broadband. Before that, he was a principal with Pilot House Ventures.

Q1 Labs, an Atlanta-based provider of network security and misuse management solutions, has received approximately $3.3 million in its initial round of venture financing. The deal was led by Business Development Bank of Canada and New Brunswick Investment Management Corp.

Reuters is reporting that Vinod Khosla, co-founder of Sun Microsystems and a partner with Kleiner, Perkins, Caufield & Byers, has donated $5 million to alma mater the Indian Institute of Technology. The money will be used to launch a new school of information technology.